Gartner: China's biz software market to grow 14.6 percent

China's enterprise software market is forecast to maintain its strong performance, with an estimated compound annual growth rate (CAGR) of 14.6 per cent from 2008 to 2013, said Gartner.

HONG KONG, 18 MARCH 2010 - China's enterprise software market is forecast to maintain its strong performance, with an estimated compound annual growth rate (CAGR) of 14.6 per cent from 2008 to 2013, said Gartner.

The CAGR is the highest growth rate in the world, the research house noted.

Despite current global conditions, the software market in China is expected to rebound to an annual growth rate of 14.8 per cent in 2010, said Gartner, adding that the increasing globalization of the Chinese economy is leading to a growing need for modern software with the latest features and improved functionality.

"Software vendors have strong growth potential in China, but also face the challenges of operating in a commercial environment that is still developing," said Hai Hong Swinehart, research analyst at Gartner. "Chinese enterprises have historically preferred to develop applications using their own labor because it costs less. However, this tendency has resulted in legacy and quickly obsolete software as well as inhibiting Chinese enterprises' sustainability and business IT continuity. Growth will mainly be driven by replacing immature infrastructure with standardized systems and the large vendors stand to benefit."

China's software revenue to surpass US$6 billion

According to Gartner's latest forecast, in 2010 China will for the first time surpass US$6 billion in software revenue in 2010.

China is the largest software market in Asia Pacific, and the country is forecast to account for 27 per cent share of the region's revenue in 2010, the equivalent to 2.7 per cent of the total worldwide software market share, said the analyst firm, adding that by 2013, China's share of the software market in Asia/Pacific is expected to reach 30 per cent, representing US$9.4 billion in revenue or 3.3 per cent of total worldwide software market revenue.

Sectors spending on software

The top four major vertical industries in terms of software spending are manufacturing, financial services, communications and government, said Gartner, estimating that in total these industries account for 60 per cent of total software spending in China.

A 2009 Gartner survey found that 46 per cent of respondents in China planned to increase their software spending in 2010, far higher than other countries surveyed, such as those in Europe, the Middle East and Africa, North America, and Latin America. The same survey found that organizations in China in 2010 are expected to spend approximately 23 per cent of their IT budgets on software compared with 33 per cent on hardware.

"China is still a hardware-centric country that tends to spend more on infrastructure, and we expect this to continue through the forecast period to 2013," said Swinehart. "Optimism regarding spending within Chinese organizations reflects confidence in China's regional economic performance, as well as the need to adopt better technology to effectively compete in a tougher global environment."